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Crypto analyst Astronomer, known as @astronomer_zero on According to him, this particular metric has historically served as a reliable indicator for identifying optimal buying opportunities within Bitcoin price cycles.
Has the Bitcoin Bottom Been Reached?
The analysis Titled “BTC Miners Electricity Costs, a 100% Accurate Bottom Signal,” it uses data to illustrate a scenario where the cost of Bitcoin production falls below the market price, suggesting a pivotal moment for potential investors. Astronomer expanded on his methodology and findings by referencing his previous predictions that successfully identified market tops, specifically a 30% decline from a $70,000 peak, which was guided by similar data-driven signals.
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Astronomers’ current focus on the cost of mining stems from its significant implications for Bitcoin’s supply dynamics. Despite the halving events designed to reduce the reward for mining Bitcoin, there remains a 0.84% annual inflation in supply, equating to approximately $10 billion worth of Bitcoin coming to market each year . This matches the total holdings of major corporate investors like MicroStrategy, indicating a substantial influx of Bitcoin from miners, who tend to sell gradually to support their operations.
However, current market conditions, as described by Astronomer, have reached a rare state where Bitcoin’s market price has fallen below the average weighted electricity cost required to mine it. This situation typically prevents miners from selling their assets for a profit, potentially reducing selling pressure in the market.
“That doesn’t just mean that miners can’t sell their BTC for a profit. It also means that it is simply cheaper to just log into a CEX and buy 1 Bitcoin, rather than having to go through the pain of mining 1 Bitcoin. So not only does this make the miners (the people who control BTC) not want to sell, it also makes them want to buy, because it is cheaper to just buy them instead of mining,” Astronomer suggests.
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This shift will impact not only miners’ selling behavior but also their purchasing strategies, reducing supply pressure and potentially causing upward price movements. The astronomer supports his claim by pointing out that historically, when production costs have fallen below market prices, it has consistently led to substantial price recovery.
He described examples from the recent past, including notable dips in March 2023 when Bitcoin reached $19,500, November 2022 at $16,500, June 2022 at $18,000, May 2020 at $8,900, March 2020 at $4,700 and November 2018 when it bottomed at $3,500. Each of these moments was followed by robust bull runs, highlighting the potential reliability of this signal.
“How often? 17 times out of 17, this meant the price was at a level that, according to history (with high statistical significance), you would want to buy, or miss and regret it for a very long time,” the analyst adds.
Currently, with the production cost of Bitcoin, according to Capriole Investment data, at $60,711 and the price at $56,713, the conditions described by Astronomer are manifesting themselves again. This combination poses a critical question to the market: is now the time to buy?
While Astronomer’s analysis is backed by historical data and detailed market observations, he remains cautiously optimistic about the outcomes, as evidenced by his closing comment: “Will it be different this time? Maybe.”
At the time of writing, BTC was trading at $56,804.
Featured image created with DALL.E, chart from TradingView.com
